US axes 651,000 jobs in February; unemployment rate highest in 25 years

US employers axed 651,000 jobs in February, pushing the unemployment rate to its highest in 25 years, as companies buckled under the strain of a recession that is showing no signs of ending, according to a government report.

While that figure was near economists' expectations for a 648,000 drop in non-farm payrolls, January and December job losses were revised sharply higher.

The Labor Department on Friday said the unemployment rate surged to 8.1 percent in February, the highest level since December 1983. That was above market forecasts for a rise to 7.9 from January's 7.6 percent.

January's job cuts were revised to show a steep decline of 655,000, while December's payrolls losses were adjusted to 681,000, the deepest since October 1949. Since the start of the recession in December 2007, the economy has purged 4.4 million jobs, with more than half occurring in the last 4 months.

Job losses in February were broad based, with only government, education and health services adding jobs.

"Since the recession began, the rise in unemployment has been concentrated among people who lost jobs, as opposed to job leavers or people joining the labor force," said Bureau of Labor Statistics Commissioner Keith Hall

The manufacturing sector shed 168,000 jobs in February, after eliminating 257,000 positions the prior month. Construction industries bled 104,000 jobs in February after losing 118,000 in January.

The service-providing industry slashed 375,000 positions after shedding 276,000 in January.

Agencies

Will US debt increase by $2 trillion in 2009?

The US national debt is expected to jump by as much as $2 trillion this year, thus putting more pressure on the American economy, a leading daily here said.

At present, the country's debt stands at nearly $10.7 trillion. Of this $3 trillion is held by foreign investors , with China ($652.9 billion) and Japan ($585.5 billion) being the top two creditors.

The soaring national debt would saddle taxpayers with huge new interest payments for years to come, the Washington Post said.

"Some analysts also worry that foreign investors, the largest United States creditors, may prove unable to absorb the skyrocketing debt, undermining confidence in the US as the bedrock of the global financial system," the Post wrote.

The newspaper said economists from across the political spectrum have endorsed the idea of going deeper into debt to combat the worst ever economic crisis since great depression of last century.

They argue that even with an increase of $2 trillion national debt, the United States is in relatively good financial shape as compared to other industrial nations.

Japan's public debt equalled 182% of its GDP in 2007 and that of Germany was 65%, the newspaper said referring to a forthcoming report by Scott Lilly, a senior fellow at the Centre for American Progress.
Even a $2 trillion increase would push the US debt to about 53 of the overall economy. This is "only a few percentage points above where it was in the early 1990s," Lilly was quoted as saying by the newspaper.

Source: Agencies

India's factory output falls for first time in 13 years

India's factory output fell for the first time in more than 13 years in October, further evidence of a rapid economic slowdown which could spark more monetary easing by the Reserve Bank of India (RBI) after aggressive weekend rate cuts.

Industrial output declined 0.4 percent in October from a year earlier, the first annual drop since data in the current series became available in April 1995, and sharply below the previous month's upwardly revised 5.5 percent.

The figure was below a forecast for growth of 2.2 percent in a Reuters poll of economists. Manufacturing production in Asia's third-largest economy fell 1.2 percent from a year earlier, data showed on Friday.

"It is a shocking figure and only underlines the fact that the Indian economy is in a very bad situation," said T.K. Bhaumik, economist at JK Industries Group. "This is a wake up call for the government."

Bhaumik called on the government to consider additional stimulus to that announced at the weekend and to use fiscal measures to lift consumer demand. Lending banks should move fast to pass on the RBI's recent rate cuts.

"Since the RBI has already done its job, now commercial banks should be fast to ease the credit line," he said referring to the Reserve Bank of India.

The Reserve Bank of India (RBI) Governor Duvvuri Subbarao has said India faces a period of painful adjustment after the global financial crisis froze credit markets in October, further weakening an economy struggling with high borrowing costs.

Subbarao said the bank's growth forecast for 2008/09 was likely to be cut from 7.5-8.0 percent. Many private economists expect it to dip below 7 percent.

The RBI cut its main rates by 1 percentage point on Saturday, lowering its key lending rate for the third time since October, and has indicated that it was ready to act again to bolster an economy slowing much faster than expected.

The government followed up with an additional $4 billion in additional spending to stimulate activity. The benchmark 10-year bond yield plunged to its lowest in more than four years after the data was published on increased expectations of further central bank action.

Industrial output rose 8.1 percent in the 2007/08 (April-March) fiscal year, compared with 11.6 percent in 2006/07.

Source: Agencies